Pakistan Economy - News & Updates - Archive

[Neo]

ISLAMABAD (May 28 2006): Ambassador of Azerbaijan Dr Enyulla Maddatli on Saturday called on Minister for Petroleum and Natural Resources, Amanullah Khan Jadoon and discussed with him matters of mutual interest and bilateral co-operation in the field of oil and gas.

Both sides agreed that there existed a lot of potential and scopes for further promoting co-operation in diversified field particularly oil and gas to their mutual advantage.

The minister said the government attaches top priority to strengthening and expanding bilateral ties with the Central Asian States and they could benefit from each other's experience in the vital energy sector.

The envoy informed the minister that Azeri government was looking forward to his visit to Baku in near future at the meeting of Pak-Azerbaijan Joint Ministerial Commission and hoped that it would open up new vistas of co-operation in the economic field.

He also indicated the Azeri companies' willingness to undertake joint ventures with Pakistani oil and gas companies and underlined the need for exchange of experts' level delegation. The minister invited Azeri companies for gas pipeline projects, LNG, oil and gas exploration projects in Pakistan.

 

[Neo]

PESHAWAR (May 28 2006): NWFP Chief Minister Akram Khan Durrani has said that delay in the execution of future plans for generating hydro power may harm the overall development and the process of stabilising economy of the Frontier province, and asked the officials concerned to ensure speedy work on the ongoing projects.

He was presiding over the 21st meeting of the Board of Directors of Sarhad Hydel Development Organisation (SHDO) at Frontier House, Peshawar, on Saturday.

The meeting was attended by members of SHDO, NWFP Chief Secretary Ejaz Ahmad Qureshi, Additional Chief Secretary Ghulam Dastgir and Secretaries of Finance, Law, Irrigation and Power.

The chief minister said that with public-private partnership, small and medium size hydro power projects would be initiated, as his government was endeavouring to upgrade water resources in the province to generate sufficient hydel power to cope with growing requirements of electricity in the province.

He said his government had planned to facilitate such plans, and resources would be generated to make possible the ongoing and future plans of hydro electric projects.

Durrani said that Malakand-III Hydro Project was playing key role in improving economic, industrial and agricultural position of the province, and stressed the need for evolving a comprehensive strategy to identify such more beneficial projects.

He directed the officials to keep vigilance on the performance of contractors against causing unjust delay in the projects. The chief minister said that 10 MW electricity would be provided to local industrial units, and added that Rs 1.5 billion profits would be annually generated and more than 20,000 acres land would be irrigated from these projects.

Akram said these projects would create jobs and would help develop backward and underprivileged areas of the province. The chief minister was briefed on various projects of SHDO. According to the briefing, Malakand-III Hydro Project would be completed by December this year. Pehur and Shishi Hydro Power Projects would be completed by December 2007. These projects would produce 81MW, 81 MW and 2 MW electricity, respectively.

The meeting was told that installation of an additional 1.4 MW unit in Roshan Hydro Power House would be completed by June 2006. New projects of SHDO include establishment of Dral Khwar (Swat) Hydro Power Project, Ranolia Hydro Power House, (Kohistan) and Mardan Hydro Power Projects. These new project would produce 35 MW, 12 MW and 2.5 MW, respectively.

The meeting was told that these projects would be completed with the help of Asian Development Bank (ADB). The meeting was informed that Malakand Hydro Project would cost Rs 6.3 billion, and expressed hope that all these expenses would be returned in the shape of income within five years.

 

[Neo]

Sunday, May 28, 2006

ISLAMABAD: The government spent an unprecedented amount of over Rs one trillion on poverty alleviation and social sector related programmes during the last four years, which caused decline in poverty from 32.1 percent in 2000-01 to 25.4 percent in 2004-05. “Rural poverty has declined from 39 percent to 31.8 percent and urban poverty from 22.7 percent to 17.1 percent,” Advisor to the Ministry of Finance, Dr. Ashfaque Hasan Khan told APP in an exclusive interview here on Saturday.

He said, the real GDP grew at an average of rate of almost 6 percent per annum in the last four years as against 3.3 percent in the preceding four years and is poised to be between 6 to 7 percent during the current fiscal year, showing a strong economic recovery in the country.

He said the growth recovered from 1.8 percent in 2000-01 to 8.4 percent last year. “If we take a longer term view, growth recovered from an average of 3 percent during last six years prior to 2001-02 to an average of over 6.5 percent during last three years (2002-03 - 2004-05),” he remarked.

Dr. Ashfaque said that due to strong domestic consumption and investment, the demand is picking momentum and the real private sector consumption grew by 8.2 percent in 2003/04 and 16.8 percent in 2004/05. Higher consumption spending, feeding back into economic activity is likely to support the ongoing growth momentum, he said adding, it suggests the emergence of a strong middle class with buying powers.

The Advisor said that unemployment has reduced from 8.3 percent in 2001-02 to 6.2 percent in the Second Quarter of 2005-06 and the pace of job creation has increased. “During 1999-2000 to 2001-02, 2.23 million jobs were created while in 2001-02 to 2003-04, 2.96 million jobs were created and during 2003-04 and the first half of the current fiscal year (2005-06), we succeeded in creating 5.8 million jobs,” he remarked.

About reduction in poverty, he said that poverty in Pakistan has declined from 32.1 percent in 2000-01 to 25.4 percent in 2004/05; Rural Poverty has declined from 39.0 to 31.8 percent and Urban Poverty from 22.7 percent to 17.1 percent, he added. Giving reasons for decline in poverty, he said, the real GDP grew at an average rate of almost 6 percent per annum in the last 4 years (2000-01 to 2004-05) as against 3.3 percent in the preceding 4 years.

Dr. Ashfaque said the agriculture sector registered a strong growth of 7.5 percent in 2004-05 and the GDP grew due to large increase in public sector spending.

He further said that Non-interest and Non-Defense (NIND) spending in real terms grew by an average rate of 8.2 percent during 2000-06 against a decline of 1.2 percent in the 1990s. There was a four times increase in remittances and significant reduction in fiscal deficit, he said and added it reduced from an average of 7.0 percent of GDP in the 1990s to around 3.0 percent in recent years.

The Advisor to Finance Ministry said that due to prudent economic policies, a high double-digit growth in exports and imports was witnessed: Dr. Ashfaque Hasan Khan who is also Director General Debt Office said there was sharp reduction in country's debt burden from over 100% of GDP to 61.7% last year. Foreign Investment recovered from an average of US $ 400 million to over US $3.0 billion this year, he added.

About Tax collection, he said collections have more than doubled in 7 years and it took 10 years to add Rs.200 billion in tax collection but it took just 7 years to add Rs.400 billion. "Pakistan has said goodbye to the IMF", he remarked.

He added that owing to stable economic positions and sound policies, Pakistan has re-entered the International capital markets and successfully brought stability in exchange rate.

About the objectives of FY 2006-07, he said that government will consolidate the gains made during the last three/four years to accelerate the pace of progress in the country.

The Advisor to Finance Ministry said "We faced head-winds right after the beginning of the current fiscal year". The Oil prices began to rise following devastating earthquake of October 8, and it went up to US $ 70/brl. The economy continues to gather momentum, he said, adding, notwithstanding head-winds the economy continues to grow strongly.

About Inflation, he said, it came down from 11.1 percent in April 2005 to 6.2 percent in April this year while the trade deficit has widened because of three or four items. Higher oil bill has contributed almost 42 percent in the widening of trade gap followed by the rise in imports of machinery (22%), import of iron and steel (12%); and increase in imports of consumer durables (including cars) contributed to only 9.2 percent.

Thus, over 85 percent increase in trade gap is contributed by these four items, he said and added most importantly, contrary to the general perception, imports of cars, TV, fridge, air conditioners etc; have contributed only 9.2 percent to the widening of trade gap.

About the future outlook, he said, a strong foundation has been laid to sustain a growth momentum of 6-8 percent p.a. Dr. Ashfaque said the government will continue its efforts to maintain a stable macroeconomic environment as it is committed to improving the lives of the common man.

Financial discipline and political and regional stability are vital ingredients for sustaining growth momentum and therefore, creating more jobs and further reducing poverty, he added.

Highlighting the significance of the forthcoming Budget (2006-07), he said that the forthcoming Budget would be people friendly and various measures will be taken to provide relief to low and fixed income groups. He said that consistency and continuity of policies would be maintained to promote investment and growth with a view to creating more jobs in the country.

 

[Neo]

Sunday, May 28, 2006

WASHINGTON: The State Department has described the just-concluded visit of a senior US official to Pakistan as having helped move US-Pakistan economic partnership to a “new level.”

US Under Secretary of State Josette Sheeran Shiner, who is in charge of economic, business and agriculture affairs, visited Pakistan from 22 to 25 May, where she met Prime Minister Shaukat Aziz, engaged in a strategic economic dialogue with leading Pakistani economic officials, visited a US earthquake relief project in a mountain village in the Siran Valley, Azad Kashmir, and participated in a meeting of the High Level Panel on UN reform co-chaired by the Pakistani prime minister.

The State Department said that during Shiner’s meeting with Aziz, the latter announced his intention to complete negotiations on a Bilateral Investment Treaty as soon as possible. Such a treaty would form “an important part of the multi-faceted US-Pakistan relationship, and would help attract US investment to Pakistan’s rapidly growing economy,” according to the Department. Shiner has emphasised the “win-win nature” of the agreement for both countries, and lauded the additional protections that US investors would receive in Pakistan under the arrangement.

The State Department said, “While in Islamabad, the under secretary engaged in an economic dialogue with leading Pakistani economic officials, led by Finance Advisor Salman Shah, to share views on domestic and international economic policies, and identify areas for strategic cooperation. The Pakistani officials explained how they plan to sustain Pakistan’s recent high growth rates by implementing a range of their ‘second generation’ microeconomic reforms. The under secretary elaborated on President Bush’s Regional Opportunity Zone (ROZ) initiative and next steps in outlining the parameters of the ambitious project. She also confirmed US government support for Pakistan as a southern hub for transportation, energy, and commercial linkages that would enhance regional economic integration between South Asia and Central Asia.”

Shiner was quoted as saying, “More and more, we find that Pakistan is a respected advocate for economic reform and liberalisation, not just in the region but in the wider world. Pakistan has been taking steps to enhance its global competitiveness. The American businessmen I met with in Pakistan were impressed with the vastly improved business climate in Pakistan, and with the government’s efforts to create jobs and economic growth. The US government wants to find ways to support Pakistan’s own efforts to ease poverty and create new economic opportunities for its citizens.”

 

[Owais]

Bangladesh response awaited to rice sell offer




DHAKA (updated on: May 29, 2006, 13:48 PST): Pakistan on Monday said it was waiting for a response to its offer to sell 500,000 tonnes of rice to Bangladesh in a state-to-state deal, a official said on Monday.

'We are waiting for Bangladesh's response as we offered to sell half a million tonnes of rice to them,' Roubina Taufiq Shah, commercial secretary of the Pakistani High Commission, told Reuters.

Pakistan made the offer when Prime Minister Begum Khaleda Zia visited Islamabad in February this year, a food ministry official said, adding that no decision has been taken yet.

"Bangladesh government informed us that they were making assessment of their requirements," Roubina said.

The food ministry launched a drive in April to procure 1.2 million tonnes of rice from the domestic market to build a food stockpile for emergencies and so far collected 172,000 tonnes, the ministry officials said.

The drive will continue till end of August, 2006, they said.

Bangladesh, where rice is the main staple food for a population of 140 million, produced 25.3 million tonnes of rice in 2004-05 fiscal year to last June, officials said

 

[Owais]

25 containers of yellow peas stuck up at Karachi port: Regulatory Duty on pulses export

KARACHI (May 29 2006): Some 25 containers of yellow split peas, worth $0.2 million have been stuck up at Karachi port due to sudden imposition of 35 percent regulatory duty on export of pulses, sources told Business Recorder on Sunday.

They said that some 25 containers holding around 625 metric tons of pulses were stuck up suddenly when the said consignment reached Karachi port on May 18 for examination and shipment to different countries, as the government had slapped 35 percent regulatory duty on their export.

"We had already signed contracts of yellow split peas (pulses) of approximately 15,000 tons worth nearly $4.5 million with different countries, including United Arab Emirates (UAE), India, Bangladesh and Sri Lanka," said an exporter.

The exporters are perplexed over the situation in which the containers are stuck up at the port, as some of the exporters have received advance payment and some have already shipped 50 percent of the orders and their payments would be cleared only when the remaining consignments would be dispatched.

"We have also received Letters of Credit (LCs) from our buyers and now we are bound to dispatch the already booked consignments," he added.

Another exporter whose containers are also piled up at the port, said, "If we do not ship the commodity, then the orders would not be cancelled, but we would have to pay additional Rs 6 per kg."

The people associated with export of pulses are confused over the situation as they believe that the government should have informed them prior to any imposition and should have allowed exporters to ship their already booked orders.

"In our trade, orders are not cancelled," said an exporter, adding that the exporters have to send the consignments at any cost and, in the current scenario, they (exporters) fear that they would have to pay additional amount for getting the consignments dispatched.

He regrettably said that the image of the country would also be portrayed as 'bad' if anyone does not fulfil the export orders within the specified time.

Karachi Wholesale Grocers' Group (KWGG) has also argued with the government over the regulatory duty issue and has demanded that the government should allow exporters to ship their already booked orders.

"Whenever any policy is announced, it must have 'flexibility' and 'cushion'. Nevertheless, this time the government issued an SRO and slapped 35 percent regulatory duty on export of pulses with immediate effect which has badly affected those who had committed their buyers for the supply pulses," said Anis Majeed, advisor to KWGG.

He dispelled the impression that prices of pulses in the country have touched the peak and in this situation exporters are unfair with the masses by exporting the commodity to other countries.

"Actually, we used to import whole yellow peas from Canada and then by passing it through different processes; we prepare yellow split peas (pulse) for export to different countries. Therefore, the allegation of exporting precious commodity is baseless," he said.

"Whole yellow peas is the product of Canada and it is not produced in our country," he said and added: "We used to import whole yellow peas at the rate of $200 per ton to $225 per ton and then exported to other countries at $325 per ton. In this way, we contributed a handsome value-addition to the national exchequer."

Exporters have claimed that 95 percent of the pulses export is of yellow split peas, and other pulses, which are commonly used in the country, are hardly 5 percent, which may not be allowed to be exported.

While giving reference to the international conference on pulses 'CICILS/IPTIC', held in Goa (India) on May 18-19, Anis Majeed said that production of pulses had declined not only in Pakistan but also in other countries around the globe.

"Non-availability of water and untimely downpour mainly hit the crop this year all over the world," he said, adding that "Pakistan is now importing moong pulse, which it has been exporting for the last five years.

 

[Owais]

ECC may discuss cement price issue today

ISLAMABAD (May 29 2006): The Ministry of Industries and Production has opposed any relaxation to cement manufacturers till such time as they set ex-factory price at Rs 275 per bag and advertise retail price in the newspapers, official sources told Business Recorder on Sunday.

The Economic Co-ordination Committee (ECC) of the Cabinet in its meeting on Monday is likely to discuss the impact of earlier decision taken to stabilise the prices of this commodity in the local market.

"Cement prices have stabilised and continue to decline gradually in the wake of government decision, and are expected to further come down due to import in the ensuing months and reduction in ex-factory rates," sources remarked.

They said that the Industries Ministry had made it clear to All Pakistan Cement Manufacturers Association (APCMA), at a meeting on May 18, that in order to provide relief to the common man the government wanted the cement prices at the level of Rs 280 per bag, which was the rate prevailing in February.

The ministry and cement manufacturers, after detailed deliberations on cement price took the following decisions:

i) The APCMA shall ensure availability of cement in the domestic market on the retail price ranging between Rs 285 and Rs 295 per bag, besides fixing ex-factory price at Rs 275.

ii) The cement manufacturers shall advertise the retail price in leading newspapers in order to avoid black marketing by dealers and retailers.

iii) The government shall consider the request of cement manufacturers to impose (quantity) limit on import and restoration of duty drawback on export of a limited quantity of 100,000 tons of cement per month on first-come-first-served basis.

But it has been suggested to ECC that as soon as the conditions regarding restoring of duty drawback on export and placing limit upon imports qualifying for freight subsidy are met, the ministry would come up with appropriate proposals, sources said.

They said that cement manufacturers had expressed grave concern over ban on its export, which according to them would bring a glut in the market by September.

The APCMA was also of the view that Pakistan would not only lose the hard-won export market in Afghanistan to India or Central Asian States due to ban on export, but the investors too would remain shy to make further investment.

"If the present policies continue, the future of cement industry in Pakistan seems bleak," cement manufacturers said, according to sources.

The APCMA had agreed to convey agreeable sale price to the Industries Ministry after consultations with member factories but they did not fulfil the commitment.

It is pertinent to mention that the Industries Ministry has formally included a clause in the Price Control Act, empowering provincial and district governments to check hoarding in their respective areas.

According to the Act, sources said, the hoarders would have to face three years imprisonment or Rs 100,000 fine in case of violating the law.

The government would not resume rebate on cement export to Afghanistan until cement manufacturers fix their price between Rs 285-295 per bag in writing on sustained basis.

 

[Owais]

Presumptive tax system for exporters to continue

ISLAMABAD (May 29 2006): While turning down a proposal to bring exports into general assessment scheme, the government has decided to continue with he presumptive tax regime for exporters during 2006-07, it is learnt.

Sources said that the decision to continue with the presumptive tax regime for exports was taken a meeting presided over by President Pervez Musharraf.

They said that the President did not agree with those officials who supported the proposal of bringing exports into general assessment regime for taxation. He directed the officials to facilitate the exporters to help them compete in the international market and capture maximum share by increasing exports.

Donor agencies had suggested to the government to do away with presumptive tax for exporters in the coming budget.

It is learnt that the Textile Ministry had strongly opposed any change in presumptive tax regime, saying that introduction of general assessment scheme would adversely affect the country's exports and would make them uncompetitive in the world markets.

In the presumptive tax system the exporters are required to pay tax at fixed ratio, without having any contact with the taxmen.

The proposed change was also contradictory to the government policy of minimising taxman and taxpayer contact.

Sources said that one reason for turning down the proposal was that it was felt that the outcome of bringing exports into general assessment regime would open another outlet for corruption.

The presumptive tax for exports varies from 0.75 percent to 1.50 percent of total value of exports, and taxmen are required to take it as final. Under presumptive tax regime, the taxmen can not question the value of the consignment or the tax amount paid by any particular exporter on any consignment. In this regime, the exporters feel easy to pay final tax liability on export proceeds through banks as it is a transparent process of payment of taxes.

It also saves time of both parties--the exporters and the taxmen. In the presumptive tax regime, exporters submit tax deduction certificate issued by the bank. Under presumptive tax regime, exports are exempted from 3 percent Workers Welfare Fund (WWF).

 

[Owais]

Action against sugar mills: government unmoved on PAC directive

ISLAMABAD (May 29 2006): The government is unresponsive to the Public Accounts Committee (PAC) directive for taking action against 17 sugar mills that held back more than 25 percent of their stocks this season, which caused steep rise in its prices by creating artificial shortage.

The committee in its meeting on May 10 had ordered the concerned departments to act against the mill owners involved in hoarding the commodity for earning undue profit.

Being the highest parliamentary body with powers of taking suo motu action of anything wrong happening in the country, the PAC directives are constitutionally binding on the government.

But sources told Business Recorder on Sunday that there was no movement in any government ministry or department in this regard, and the PAC initiative was likely to go up in smoke.

The reason behind this static approach, they added, was that those who owned guilty sugar mills were highly influential and powerful, and some of them are in the Cabinet.

"How do you expect action against so powerful individuals on PAC directive? You see, what happens when the National Accountability Bureau (NAB) initiated probe into their wrongdoings," an official commented.

Most of these 17 sugar mills belong to the ruling PML top leadership, including its President, Shujaat Hussain, Commerce Minister Hamayun Akhtar, Industries Minister Jahangir Tareen and MNA Nasrullah Drashek.

Former exiled Prime Minister Nawaz Sharif and his brother Shahbaz Sharif are also among those whose mills did not float their stocks into the market and made huge profits.

The newly appointed chairman of the Earthquake Reconstruction and Rehabilitation Authority (Erra), Salim Altaf is another one who also would have received his share out of the feast.

Prime Minister Shaukat Aziz directed the Finance and Food ministries early this year to make sure that none out of 78 sugar mills in the country held back more than 25 percent of its total stocks. But 17 sugar mills were so daring that they did not pay any attention to the directive and hoarded much of their stocks, in some cases more than 70 percent, to cash on an anticipated rise in the sweetener's prices.

When the PAC took up the matter it was being anticipated that the guilty sugar mills would be punished. But the way things are moving it doesn't seem that anything would happen, sources said.

 

[Owais]

TDA likely to replace EPB next week

KARACHI (May 29 2006): The establishment of proposed Trade Development Authority (TDA), to replace the Export Promotion Bureau (EPB), is likely to be announced in the first week of June, 2006.

Source told Business Recorder on Sunday that formal approval for the establishment of TDA would be given in a meeting on Monday in Islamabad.

"The establishment of TDA is on the cards, and this would be announced very soon", an official said here.

The officials in favour of establishment of TDA, to replace EPB, said that the objectives and benefits to be achieved by TDA includes ensuring timely availability of a product or service desired by the world in most competitive environments, produced and delivered in an environment and manner acceptable under the evolving new world trading order and to be able to "market it" successfully around the world.

It would also benefit from higher professional level of expertise, pro and reactive, responding promptly and efficiently to stakeholders prime needs, to use world class management and marketing tools and techniques and IT for organisational maximum efficiency and productivity.

They said that it would be a truly result-oriented and a state-of-the-art model-based professional organisation, and overall objective is to at least double exports every five years.

THE OPERATIONAL OBJECTIVES OF ESTABLISHING TDA ARE: export development vision; strategy, plans and initiatives for products and services and result-oriented execution; support of export effort at national level and forging effective liaison with stakeholders to learn from experience and avoid duplication of effort; export policy issues emanating from the provinces which have export implications; export promotion and development; research and related studies within and outside Pakistan with respect to exports; planning, organisation, and execution of exhibitions, delegations to and from Pakistan; local, international and inter-provincial export promotional conferences, workshops, seminars etc; foreign trade promotion, advertising through all means and media as required; overseas trade offices, within and outside Pakistan missions, including display centers, warehousing, etc; liaison with trade bodies abroad including overseas Pakistani foundation; supply chain development and co-ordination with federal and provincial governments and related organisations through Cabinet Export Committee and export facilitation.

With regard to export development and promotion, the TDA would be beneficial in implementation of export development plans; overseas and local marketing promotions and related activities, facilities and infrastructure such as warehouses, display centres etc; buyer seller match making; exporters and buyers facilitation; management of expo centres in Pakistan or abroad; promotion of national and product branding and ensuring institutional linkages with stakeholders local and abroad.

It is said that TDA would also be beneficial in export facilitation, training and development of SMEs, exporters and all other stakeholders and also helpful to strengthen the national export culture, Pakistan business image management, SME and export training and development, exporters skill development, close interaction with private sector and ensuring institutional linkages with stakeholders local and abroad.

The business community of the country is seeing a very positive change for increasing country's export after establishment of the TDA. The EPB was only to focus to promote the country's exports, while the TDA would focus on trade including exports, industries and their requirements.

Federal Commerce Minister would be the chairman of this new establishment and it would be run by a chief executive officer. It would have one chief operating officer who would be a grade 21 officer from the government. Twenty directors would be appointed out of them 70 percent would be taken from private sector.

It is learnt that about 200 highly qualified and experienced professionals would be appointed from private sector to run this new organisation in a very moderate manner and according to the demands of the global market.

All economic and commercial counsellors in various Pakistani missions world-wide would be directly under the TDA, which would be given tasks to increase the country's exports.

EPB Chairman Tariq Ikram played a very active role for establishing the TDA. He always gave his firm support to establish such an organisation, which could work more independently. He advocated that until and unless working independently and without inducting more professionals in the organisation, the country's exports would not increase.

 

[Owais]

MONEY WEEK: government borrows Rs 27 billion for wheat procurement in three weeks

RECORDER REVIEW

KARACHI (May 29 2006): The two most important features of the monetary accounts of the country during the last about two months to May 13, 2006 had been the gradually increasing government borrowing for commodity operations (wheat procurement) and a phenomenal growth in money supply on account of a build-up of about $1.8 billion worth of foreign reserves.

The government commodity operations, which on April 22 showed a credit retirement of about Rs 36 billion, showed an additional borrowing of Rs 27 billion during the last three weeks to May 13 reducing net retirement under the head to just Rs 9 billion. Actual borrowing for the purpose could be still higher if the normal retirement of old loans under commodity operations is also taken into account.

Meanwhile, according to a news item, actual wheat procurement during the current season, for which most of the money was borrowed from banks, reached 3.8 million tonnes as against the target of 5 million tonnes (Punjab: 2.1 million tonnes against 3 million tonnes; Sindh: about 0.7 million tonnes against 0.7 million tonnes; and Pasco: 1 million tonnes against 1.3 million tonnes of target).

Similarly, foreign assets of the banking system which stood depleted to the extent of Rs 94 billion up to March 18 started improving thereafter as a result of the floatation of sovereign dollar bonds and privatisation proceeds and on May 13 reached a net addition of Rs 44 billion over the level attained on June 30 last year.

Thus, the build-up of foreign reserves of the country in the last about two months contributed some Rs 138 billion to the incremental money supply during the intervening period. On another plane, since the increase in money supply on this account was because of the sale of foreign exchange to the central bank by the government, it also generated revenue for the government in the equal amount.

The impact was that at one stage (April 22) the net government borrowing from banks stood reduced to about Rs 7 billion after having reached Rs 161 billion on March 11. It stood at Rs 60 billion on May 13 mainly because of commodity operations. Among other developments, the private sector borrowing decelerated to Rs 340 billion on May 13 from Rs 346 million on May 6. It means that banks fresh loaning to the private sector is becoming difficult as cash received against retired loans was recycled to investments in government securities to avoid visits to the discount window.

The credit to PSEs, in the meanwhile, rose from Rs 3 billion on May 6 to Rs 5.4 billion on May 13. However, contraction impact of other items (net) or OINS increased by another Rs 4 billion to Rs 93 billion over the week.

Read with the foregoing developments in the foreign and domestic assets of the banking system, the money supply as a whole increased by Rs 15.6 billion to Rs 354 billion over the week. Of the total increase during the week, Rs 11 billion was the result of increase in net domestic assets or domestic credit expansion, while the remaining about Rs 5 billion was the result of the increase in foreign assets (or FE reserves) of the banking system.

As mentioned in the previous review, the increase in NFA of the banking system during the last three weeks kept pushing up the liquid foreign exchange reserves of the country: crossing the $13 billion mark on April 29, rising to $13,054 million on May 6 and holding on to the record level at $13,071 million on May 13. Advance information on liquid foreign exchange reserves for May 20 indicated that though reserves declined over the week by about $24 million they resisted to break the $13 billion barrier downward so that reserves still stood at $13,047.1 million ($10,658.1 million with the SBP and $2,389 million with the scheduled banks).

 

[Owais]

Pakistan asks non-aligned movement to support dialogue process with India PUTRAJAYA (May 29 2006): Pakistan has said that it wanted members of the non-aligned movement (NAM) to support its ongoing dialogue process with India to resolve bilateral issues, including Kashmir.

"We want the NAM countries to support the peace process and to see it as a result-oriented and meaningful dialogue," Pakistan's Additional Foreign Secretary Tariq Osman Hyder was quoted as saying by Malaysia's Bernama news agency on Sunday.

"It is definitely our objective that something good should come out of discussions and it is also desired by our leadership," he said.

Hyder is here to attend the senior officials' meeting preceding the Non-Aligned Movement Co-ordinating Bureau (NAM-Cob) ministerial meeting beginning on Monday.

 

[Owais]

Indian home secretary due today


NEW DELHI (May 29 2006): Indian Home Secretary V.K. Duggal is leaving for Islamabad on Monday for talks with Pakistan. The talks, which are part of the composite dialogue between India and Pakistan, will be held on June 30 and 31.

The main purpose of the talks is to discuss issues pertaining to terrorism and the need for increased co-operation on drugs and narcotics control.

The emphasis during the talks will be on continuing the peace process and increasing people-to-people contact between the two countries. Interior Secretary Syed Kamal Shah will lead the Pakistan side.

 

[Owais]

KSE hits 10-week low
RECORDER REVIEW


KARACHI (May 29 2006): Political uncertainties clubbed with the Sindh government and rumours that the government would tax share business in the forthcoming budget hampered any fresh investment.

The market was in roller-coaster mode yet again, as the KSE-100 Index swelled by 256 points in the first three trading sessions, and then plunged by 457 points in the next two to end the week at 10660 points.

Rumours regarding budget proposals also created negative sentiments in the market due to which equity prices lost significant ground. One of the rumours was regarding the imposition of capital gains tax on the stocks, which would have affected the liquidity in the market.

As if this wasn't enough, the political situation is not really comfortable at this point in time. To add more difficulties, one more gossip was in the market regarding the introduction of CED on advances of the commercial banks. Finally, the stay order issued against the privatisation of the Pakistan Steel Mill by the Supreme Court of Pakistan also shattered the confidence of investors.

It was yet another bearish week at Pakistan's equity market as key the KSE Index eroded 1.8 percent (201 points) to post a 10-week low closing of 10,660. Uncertainty regarding political set-up in Sindh and unconfirmed reports about taxes in upcoming Budget FY07 forced investors and punters to remain on the sideline.

Moreover, as the privatisation of the Pakistan Steel and the PTCL is now being challenged in the local courts, market players are worried about this also. On the other hand, positive news regarding the sell-off of state-owned mutual fund, NIT, and oil marketing giant, PSO, failed to provide the much needed support to local stocks.

The dullness of the market can also be judged from low volumes on the sock market. Last week, the average daily turnover was only 195 million shares. In fact, on Tuesday, the ready market volume hit a 9-month low of 123 million shares.

Ahsan Mehanti, CEO of Shezhzad Chamdia Securities Company, said that uncertainties linked to announcement of federal budget, substantial decline at the international bourses and swapping of May to June future contracts. "With share values reached attractive levels at banking, cement and oil counters, we foresee some recovery this week and expecting some fresh liquidity arriving from the mutual funds, endorsing some recovery", he added.

Farheen Saquib, research analyst from Alfalah Securities said last week, the market behaviour was quite directionless with activity remaining quite dull amidst low volumes. Though the index oscillated between positive and negative zone giving some intra-day opportunity to the jobbers, but overall most of the investors' preferred to stay sidelined.

"We would advise a cautious stance on the market with buying in selective fundamentally strong scrips. Also the market investors are still reluctant due to the uncertainty about the upcoming budget, therefore, the proper direction of the market would be easier to predict after the FY07 Budget announcement", said Khalid Iqbal Siddiqui, head of research at Investment Capital Securities.

Historically speaking activity in the stock market do remain lifeless in the pre-budget sessions on account of uncertainty in the upcoming budget. At current levels sentiments do seem mixed amidst low volumes.

The jobbers should adopt a cautious strategy; however, selective cherry picking is advisable for long-term investors in good valued fundamental stocks.

Last week, MSCI AsiaxJP came down by 4.6 percent with MSCI EM Index declining by 4.5 percent amid rising interest rates. India's BSE Sensex amid volatility also declined by 1 percent during the week. Though the role of foreign fund managers in Pakistan market is not as strong as in regional markets, there is concern that offshore funds that bought shares in Pakistan worth $355 million (net inflow) in the first 10 months of FY06 may also sale their holdings in Pakistan. And that is why for the last few weeks Pakistan stocks are also under pressure.

 

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ISLAMABAD (May 29 2006): The Asian Development Bank (ADB) has approved $10 million technical assistance loan for Karachi's mega-city development project that will help in addressing the long-term and holistic development needs of the city.

Karachi, the hub of retail and wholesale trade, the centre of head offices of banking and insurance sectors and the gateway of the country generating about 20 percent of the national output.

The execution of the project would further help in boosting the national income and contribute to a sustainable improvement in the quality of life of its residents.

The bank's loan will cover 75 percent of the project's total estimated cost of $13.33 million. The loan comes from ADB's concessional Asian Development Fund (ADF) and carries a 32-year term, including a grace period of 8 years. Interest would be charged at one percent per annum during the grace period and 1.5 percent per annum thereafter.

The government will contribute the balance of $3.33 million. The finance department of the government of Sindh would be the executing agency for the project, which is due for completion in January 2010.

But while the economy and population of Karachi have expanded significantly, few investments have been made in the city's urban infrastructure over the past two decades, resulting in haphazard development, a polluted urban environment, and, for many, a poor quality of life.

Infrastructure and services that are inadequate and unreliable are adding to business and household costs, harming Karachi's urban and natural environments, and decreasing the city's global competitiveness compared with alternative Asian mega cities.

The project will provide resources for the City District Government of Karachi, the town municipal administrations, and utilities to improve their city planning, management, and financing, as well as in applying commercial principles in the provision of infrastructure and services.

It will then help prepare projects for expanding and improving the mega city's infrastructure and services that may be funded by ADB in its lending programme for Karachi over the next four years. Priority projects to be prepared cover water, sewerage, and drainage, solid waste management, roads and transport, and upgrading of informal settlements.